In the new issue of Regulation, economist Pierre Lemieux argues that the recent oil price decline is at least partly the result of increased supply from the extraction of shale oil. The increased supply allows the economy to produce more goods, which benefits some people, if not all of them. Thus, contrary to some commentary in the press, cheaper oil prices cannot harm the economy as a whole.

Two long wars, chronic deficits, the financial crisis, the costly drug war, the growth of executive power under Presidents Bush and Obama, and the revelations about NSA abuses, have given rise to a growing libertarian movement in our country – with a greater focus on individual liberty and less government power. David Boaz’s newly released The Libertarian Mind is a comprehensive guide to the history, philosophy, and growth of the libertarian movement, with incisive analyses of today’s most pressing issues and policies.

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Archives: 05/2011

Awful ruling handed down by the Supreme Court this morning in a case called Kentucky v. King [pdf]. The case concerns the power to break into a person’s home without the occupant’s consent and without a warrant. Our homes are supposed to be our castles–so the general rule is that the police must get an independent judge to approve a warrant application before the door can be forced open. There are a few common sense exceptions to the general rule. For example, if someone is screaming for help, the police can enter. Also if the police are in hot pursuit, they can follow the suspect on to private property and into a home under such circumstances. Today’s ruling expands the exceptions to situations where the police suspect that the occupants of a house may be destroying contraband such as marijuana, cocaine, or other narcotics.

In this case, the police were after a drug dealer after he fled from a controlled-buy transaction. The dealer entered some apartment but the police were unsure of the unit number. As the police got closer, they could smell marijuana coming from a nearby apartment. Instead of posting an officer nearby and applying for a warrant, they decided to bang on the door, shouting “Police!” Hearing some rustling inside, the police broke down the door so evidence could not be destroyed. The occupants were arrested on drug charges and they later challenged the legality of the police entry and search. (As it happens, the dealer the police were trying to capture was found in another apartment.)

The lower courts have generally frowned on what they describe as exigencies manufactured by police conduct, but the Supreme Court has now overturned those lower court precedents by a 8-1 vote. In dissent, Justice Ginsburg asked the right question: “How ‘secure’ do our homes remain if police, armed with no warrant, can pound on doors at will and, on hearing sounds indicative of things moving, forcibly enter and search for evidence of unlawful activity?” And the unfortunate answer to the question is, a lot less secure.

Despite previously supporting them, the Obama administration announced today that it would not submit the three outstanding preferential trade deals (with South Korea, Colombia and Panama) for a vote unless and until Congress reinstates an expanded version of Trade Adjustment Assistance, a program of benefits for workers who have lost their job because of competition from imports. Although the basic TAA program (with us since 1974) is still in place, a version expanded by the stimulus package in 2009 lapsed in February amid some Republicans’ concerns about its cost and its false premise: that workers who lose their jobs because of import competition are more deserving than other unemployed Americans. More on TAA here and here.

According to this article by Congressional Quarterly[$], the business community supports the enhanced TAA, seeing it as a worthwhile bribe compromise to secure votes for trade agreements. I understand that logic, even if I don’t support it. But the merits of that argument aside, and as I’ve outlined repeatedly, I’m not sure the deal holds anymore. While it is true that TAA has in the past been used to secure votes for trade agreements, that is not really necessary in this case. After all, if the Republicans all voted in favor of the agreements, then Democratic votes (those most likely to need some sort of assurance on welfare) would not be needed, unless the administration is implying a veto threat. Indeed, it is likely that making an expanded TAA a condition for the trade deals would cost some votes from conservative and tea-party minded Republicans. But the administration wants a larger TAA program in place, and this is their price. Stay tuned.

In 1995, shortly after becoming Speaker of the House, Newt Gingrich mulled a radical overhaul of the U.S. Food and Drug Administration. As he put it to a room full of health insurers, “Maybe we’ll take out FDA.”

What made Newt likable to advocates of freedom is sadly no longer part of his schtick. Here’s how Andrew Stiles reports on Newt’s appearance on Meet the Press yesterday:

“I don’t think right-wing social engineering is any more desirable than left-wing social engineering,” he said when asked about [House Budget Committee chairman Paul] Ryan’s [R-WI] plan to transition to a “premium support” model for Medicare. “I don’t think imposing radical change from the right or the left is a very good way for a free society to operate.”

As far as an alternative, Gingrich trotted out the same appeal employed by Obama/Reid/Pelosi — for a “national conversation” on how to “improve” Medicare, and promised to eliminate ‘waste, fraud and abuse,’ etc.

“I think what you want to have is a system where people voluntarily migrate to better outcomes, better solutions, better options,” Gingrich said. Ryan’s plan was simply “too big a jump.”

He even went so far as to compare it the Obama health-care plan. “I’m against Obamacare, which is imposing radical change, and I would be against a conservative imposing radical change.”

If you close your eyes, it’s like listening to The Princess Bride. Medicare and Medicaid are nothing if not social engineering. So by Newt’s logic, we should get rid of them. But Newt also says that radical change is bad, which means we can’t. That leaves incremental changes. But incremental changes to massive social-engineering experiments are themselves social engineering, so we clearly cannot make incremental changes, either. ObamaCare is both social engineering and radical change. Again by Newt’s logic, ObamaCare is bad, and we must get rid of it, but we can’t. Truly, he has a dizzying intellect.

Newt’s objection to Paul Ryan’s Medicare reforms is no less incoherent. It appears to be that the reforms approved by the House would eliminate the traditional Medicare program as an option for Americans who enroll after 2021. So far as I can tell, Newt’s opposition to this feature is consistent with his past positions on Medicare reform. He wants to let people stay in traditional Medicare if that’s what they prefer, and would have traditional Medicare compete against private insurance companies for Medicare enrollees.

But it is completely inconsistent with Newt’s opposition to President Obama’s call for a so-called “public option” to compete with private insurance companies. In 2009, Newt toldGood Morning America:

I guarantee you the language they draft for the public plan will give it huge advantages over the private sector or it won’t work…what they will do is rig the game…I mean, anybody who’s watched this Congress who believes that this Congress is going to design a fair, neutral playing field I think would be totally out of touch with reality.

Newt may not realize this, but he was actually explaining why his preferred Medicare reforms would fail: Congress would rig the game to protect the “public option” that Congress offers to seniors – i.e., traditional Medicare. House Republicans, led by Paul Ryan, rather bravely stuck to their guns when they kept a “public option” out of their proposed Medicare reforms. Ryan is offering Republicans credibility and success. By his own admission, Newt is offering them failure.

What’s up with Mitt Romney and Newt Gingrich? Does the Republican presidential nomination race have some sort of prize for insincerity or incoherence that I don’t know about?

Finally, Newt endorsed a “variation of the individual mandate” (tell me again why he opposes ObamaCare?) and said there is “a way to do it that make most libertarians relatively happy.” He must have meant to say leftists rather than libertarians. Regardless, I invite Newt to come to the Cato Institute so he can explain to people who actually care about freedom just how happy he’s going to make us.

Recently I criticized Sen. Jim DeMint for saying, “It’s impossible to be a fiscal conservative unless you’re a social conservative,” and I noted that former governor Mike Huckabee had made similar points. Yesterday on “Fox News Sunday” Huckabee said, “all social conservatives I know are also fiscal conservatives. Not necessarily the other way around.”

Well, I can tell you one social conservative who isn’t a fiscal conservative – former governor Mike Huckabee. Here’s what Cato’s “Fiscal Policy Report Card on America’s Governors” reported in 2006, at the end of Huckabee’s tenure as governor of Arkansas:

Final-Term Grade, F; Final Overall Grade, D

Thanks to a final term grade of F, Huckabee earns an overall grade of D for his entire governorship. Like many Republicans, his grades dropped the longer he stayed in office. In his first few years, he fought hard for a sweeping $70 million tax cut package that was the first broad-based tax cut in the state in more than 20 years. He even signed a bill to cut the state’s 6 percent capital gains tax—a significant pro-growth accomplishment. But nine days after being reelected in 2002, he proposed a sales tax increase to cover a budget deficit caused partly by large spending increases that he proposed and approved, including an expansion in Medicare eligibility that Huckabee made a centerpiece of his 1997 agenda. He agreed to a 3 percent income tax “surcharge” and a 25-cent cigarette tax increase. In response to a court order to increase spending on education, Huckabee proposed another sales tax increase. Huckabee wants to run for the GOP presidential nomination next year. He’s already been hailed as a viable big-government conservative candidate by some. That seems about right: Huckabee’s leadership has left taxpayers in Arkansas much worse off.

Carrying on an annual tradition dating back to President Franklin Roosevelt, President Obama issued a proclamation on Friday declaring this third week in May “World Trade Week.”

Of course, every week is world trade week at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, but in order to do our part as good citizens, we’ve organized a book forum this Tuesday, May 17, at 4 p.m. on a new book by Dartmouth College economist Douglas Irwin, titled, Peddling Protectionism: Smoot-Hawley and the Great Depression.

The Smoot-Hawley tariff bill is a fitting subject for any World Trade Week. As we note in the invitation:

More than 80 years after its passage, the Smoot-Hawley Tariff Act of 1930 still resonates in today’s debate over trade policy. Advocates of trade blame the law for deepening the Great Depression and warn of the economic damage from a reversion to protectionism. Skeptics of trade say its impact has been exaggerated. Economist and historian Douglas Irwin tells the messy and, at times, amusing story of how Congress dramatically raised tariffs in 1930 just as the world was plunging into depression, and analyzes the economic consequences of the most infamous trade bill ever enacted by Congress. Irwin then draws important lessons that can help today’s trade policymakers avoid the costly mistakes of the past.

Professor Irwin will talk about his book and answer questions about this turning point in U.S. trade history. There is still time to sign up here to attend the event in person at Cato’s F.A. Hayek Auditorium, or you can watch the live video feed online here.

Higher taxes on an activity would generally lead to less of that activity, especially if a good substitute exists that is not taxed. In this case, donors could give money to 527 groups. Such donations are exempt from taxation. But 527 groups are subject to disclosure of donors.

The IRS investigations involve tax provisions “that had rarely, if ever, been enforced.” Why now? We do not know. But 501(c)(4) groups played in a important part in the 2010 campaign. As you know, the party in power lost control of the House of Representatives in 2010. With the president’s re-election at stake in 2012, the administration might hope that that less money is available to fund the political speech of its opponents.

The White House has already issued a draft order requiring disclosure of political spending by government contractors. Now these investigations of donors. The IRS effort need not lead to legal complaints to be politically effective. As one expert notes, “The lack of clarity and the potential for not-insignificant taxation on these gifts will cause many of the biggest donors to think twice.”

Many people argue that mandatory disclosure of political spending has few costs and many benefits. Such laws are said to discourage few donors from funding political speech. If that is true, why is the Obama administration so interested in forcing donors out of anonymity?

Perhaps the administration believes deeply in transparency. Or perhaps the administration believes that attacking (no longer anonymous) donors will effectively discourage speech critical of the President in 2012.

Michael Gerson’s predictable, reflexive attack on Rep. Ron Paul in his May 10 op-ed in the WaPo for Paul’s sensible stand in favor of ending the futile crusade called the War on Drugs, makes a curious argument. He asserts that there is a “de facto decriminalization of drugs” in Washington, D.C. Curious, because there are few places in the nation where the drug war is waged more vigorously. Doesn’t seem to be working, does it?

Yet Gerson would expand the effort. Never mind that the social pathologies in the District for which Gerson’s compassionate conservative heart bleeds are mainly a result of making drugs illegal: Turf wars with innocents caught in the crossfire; children quitting school to sell drugs because of the artificially high prices prohibition creates; disrespect for the law due to a massive criminal subculture.

Gerson, one of the chief architects of the disastrous Bush II administration, should step away from his obsessive disdain for libertarianism and consider the nationwide decriminalization of drugs undertaken in Portugal in 2001. Drugs use is down, particularly among young people, and drug-related crimes have dropped precipitously. There is a reason hundreds of thousands of Mexicans have taken to the streets to call for the end to the war on drugs there that is tearing apart the fabric of Mexican society. On top of the social aspects of the drug war dystopia, Cato senior fellow and Harvard economist Jeffery Miron estimates that ending the drug war in the U.S. would save $41.3 billion annually. As usual, Ron Paul has it right.